Judgment Calls. Thomas H. Davenport

modesty”—the recognition that, no matter how smart and knowledgeable you are, you can still be thoroughly wrong about important issues.⁸

      Reflections on Organizational Judgment in NASA STS-119

      In a recent study, Karl Weick and Kathleen Sutcliffe analyzed what they called “high-reliability organizations”—and what they do to perform consistently at a high level of quality control.⁹ The mind-set and processes of organizations like hostage negotiation teams, emergency medical teams, nuclear power facilities, and firefighters are integrated and designed to perform better than many organizations; they have to be, because their price for failure is high. A major barrier they constantly fight to overcome is complacency and arrogance. Weick and Sutcliffe note five attributes of these organizations, all of which we can identify in this NASA case: commitment to tracking small failures, the ability to recognize and understand complex issues, real attention to frontline (operational) workers, the ability to learn from and rebound from errors, and the ability to improvise effective response to crisis.

      A major part of NASA's ability to do all those things was its problem-solving process, as seen in this case. It both followed a clear and logical analytical approach, in appropriate sequence, and also counterbalanced the sequence by flexibility for change as needed. The overarching culture was one of open exchange, honoring of diverse opinions, and the embrace of the right to dissent. Today we admire NASA not just for its successes but for its ability to rebound from the horrible tragedies of Challenger and Columbia. If ever there has been a resilient and high-reliability organization, it is the National Aeronautics and Space Administration—and the judgment it has built is clearly a very important part of what it is.

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      WGB Homes

      How Can We Sell This House?

      GREG BURRILL IS the owner and founder of WGB Homes. WGB has built over 1,800 homes in the western and southern suburbs of Boston. Boston is known for its “Route 128” technology corridor, but in fact most of the technology activity in recent years has taken place near Interstate 495, the “outer loop” that when originally built, ran through farms, fields, and small towns. Now it's the home of EMC, Hewlett-Packard, Staples, and other large employers, and Greg Burrill has built a lot of homes for their executives and employees. The area—alternatively known as MetroWest or the Blackstone Valley—also has good access to downtown Boston via the Massachusetts Turnpike and commuter rail service. It's been the primary growth area for residential real estate in Boston over the last twenty or thirty years, since there was plenty of both open space and jobs in the area.¹

      Burrill's been in business for thirty-nine years—through good times and bad for home builders—so he must be doing something right. He's conservative in his approach to his business, never going into deep debt like many home builders. “You have to have low loan-to-value ratios, and you have to have cash,” he notes. He also simply slows the pace of development and construction down when times are tough. They've certainly been tough over the last several years; Burrill doesn't remember a period of decline in residential real estate that lasted this long.

      WGB Homes is primarily a family business. Greg Burrill's brother Steve is its vice president. His two daughters, Erica and Vanessa, both work for the company, as does one son-in-law. In a newspaper article about the company, a buyer of one of their homes described them as “nice, honest, fair people.”² The company's pattern is to build one development project at a time—enough to keep all members of the family and company busy, but not anything that will bankrupt the company in a residential construction turndown. They do it all—buy the raw land, develop the land, build houses, and market them. They will occasionally even resell a house in one of their neighborhoods if approached by the owner.

      WGB's current development project is called Brookmeadow Village. It's in the semirural town of South Grafton. Grafton was one of the Massachusetts towns known for “praying Indians”; the Pilgrim missionary John Eliot established a church and school for the Nipmuck tribe there in 1671. It was later known briefly for woolen manufacturing. Today it's mostly an exurb for young families who can't afford the high housing prices nearer Boston. It's still not cheap, however; new houses in Brookmeadow Village average just over half a million dollars.

      Brookmeadow Village is a ninety-one-lot neighborhood. Burrill prides himself on building neighborhoods, not subdivisions, and the company sponsors parties and picnics throughout the year for the neighborhoods it has built. Brookmeadow Village is located on one hundred thirty acres and includes a small retail complex, seventy-five acres of open space, and over two miles of walking trails leading down to baseball and soccer fields. All houses are Energy Star certified—Burrill's first development with that qualification. Overall, the selling of the project has gone well given the difficult economy; over twenty homes have been built and sold—including one to Erica Burrill and her husband.

      The House That Wouldn't Sell

      Despite the success of the project overall, one of WGB's spec houses in Brookmeadow Village sat unsold for much longer than the usual period. Priced at about $550,000, it was a substantial investment to carry for a family firm. WGB had tried something new with this particular home, but given what Burrill knew of changing demographics and customer preferences, it seemed like a safe bet. But if so, why wasn't it selling?

      A nonselling house is an occasional but important problem for a small business like WGB. The way the company tackled the challenge reflects perhaps the most core element of great organizational judgment—pursuing a decision through an iterative process of problem solving. But the way it did that also reflects the special culture and leadership style of founder Greg Burrill.

      Burrill's sales staff heard regularly from empty nesters and couples with older children that they enjoyed the community feel of a suburban neighborhood, but had different needs than young families. The wish for a master bedroom on the first floor came up repeatedly. Besides anticipating the day when they would not want to climb stairs so frequently, many customers thought the aging of the baby boom generation would give such houses high resale value. So WGB designed this house—called the Oxford—with a first floor master suite. It also had three other bedrooms upstairs, and a relatively small backyard—again, for baby boomers who don't want to spend all their time cutting grass—that looked out over forested land.

      And indeed, interest in the house was high. But despite a significant amount of traffic through it, after six months it hadn't sold. At that point, Burrill worked with his sales office to figure out alternative ways to market the house, and also reduced the price a bit. That brought even more traffic—but months later, still no sale. Clearly the location was not the issue, but was it the lot size, or the price, or something about the design?

      Burrill thought systematically about what he could change in the house. The lot size was fixed. He'd already lowered the price a bit, and lowering it further might reduce perceived values of all the other houses and lots in Brookmeadow Village. He leaned toward the design as the problem. Two other houses in the Grafton area with similar designs, built by other local builders, weren't selling either. Yet changing the design would be difficult, so he needed more information.

      Sourcing the Wisdom of the (In) Crowd

      Burrill had faced similar situations before during difficult housing markets, so he knew what to do. Whenever a house doesn't sell, he calls on the wisdom of the crowd. The crowd, in this case, is anyone who might have an informed opinion on the issue, including:

       His wife and the family members who work for the company, including his brother, his two daughters, and his son-in-law

       The other twelve or so employees of WGB Homes

       Subcontractors who have worked on the house and on others in the development

       Customers who purchased other houses in the neighborhood

      Burrill asks everyone who's seen the house to furnish opinions about how to improve it. “Everyone is a designer